July 7, 2010 - Stora Enso said that it will move forward to permanently close production of newsprint and directory paper at its Varkaus mill in Finland by the end of the third quarter of 2010.

Stora Enso initially proposed the closure of newsprint capacity at Varkaus on April 22 of this year. The closure involves the mill's two newsprint machines, PM 2 and PM 4, which will reduce the company's newsprint and directory paper production by 290,000 tons per year.

Some 175 people out of the mill's 506 employees will be affected by the measure.

The Helsinki-based papermaker said the machine closures are the result of overcapacity in the European market, coupled with a trend of declining demand and weak pricing.

“The overcapacity position in the European newsprint and directory paper market has persisted in 2010. Consequently, sales prices have fallen significantly,” said Juha Vanhainen, EVP, Publication Paper Business Area and Country Manager, Finland.

“In the longer term, demand in Europe is expected to decline further, as has been happening in North America. In addition, the competitiveness of Varkaus is weakened because newsprint production at Varkaus relies on less-competitive virgin fiber, the availability of wood raw material in Finland is not stable and Varkaus is far away from most of its customers and main markets,” Vanhainen explained.

Stora Enso said the Varkaus facility will continue to produce pulp and fine paper after newsprint and directory paper production ends.

In addition, the operations of the sawmill and the NSE Biofuels Oy biofuel joint venture with Neste Oil and its demonstration plant will also continue, the company added.